Agile Management | NOOP.NL

Empowerment, That Horrible Word

What scientists call distributed control is usually called empowerment by management consultants. However, some experts don’t like the term. The word seems to suggest that people are “disempowered” by default and need to be “empowered” by their managers. Perhaps that was indeed its original meaning, and I agree that this could be seen as disrespectful.

On the other hand, I believe networked systems are more powerful than hierarchical systems, because it’s so much harder to destroy them. By distributing control in an organization we not only empower workers, we also empower the managers. Maybe we should see it as empowerment of the system, not of the people. Remember the last time you were sick? I bet you felt quite powerless as an individual person against that tiny distributed virus. I’m just glad your distributed immune system was even more powerful, or else I had one reader less!

Plenty of arguments in favor of empowerment are cited in management literature, such as improving worker satisfaction, increasing profitability, and strengthening competitiveness. All of it is true. But never forget that the real reason for empowerment is to improve system effectiveness and survival. We enable the organization to be more resilient and agile, by delegating decision making and distributing control.

All over the world, knowledge workers are becoming better educated and more able to take matters in their own hands. And the more educated people are, the less effective authoritarian power works. In many organizations teams understand their work better than their managers do. Therefore the primary concern of management should be empowerment, not supervision. We aim for a more powerful system, not better controlled people.

This text is part of Delegation Boards, a Management 3.0 Workout article. Read more on my mailing list.

Delegation Requires Boundaries

The origin of the word management is from Italian, meaning “taking care of horses”.

All I know about horses is what I picked up from fantasy literature. I know they often have saddles, bridles, spurs, bits, shoes (not Italian), and long beautiful manes that always blow the right way when warriors need to stab an enemy to death. The ones who just go and sit on a wild horse and yell “yee-haw!” are usually dead before page 50.

The caretaking of horses includes giving direction and setting boundaries. Quite often, when managers delegate work to teams they don’t give them clear boundaries of authority. By trial and error teams need to find out what they can and cannot do, usually incurring some emotional damage along the way. This was described by Donald Reinertsen as the “discovery of invisible electric fences” [Reinertsen, Managing the Design Factory p.107]. Repeatedly running into an electric fence is not only a waste of time and resources, but it also kills motivation, and it ruins the coat of the horse. With no idea of what the invisible boundaries are around it, the horse will prefer to stand still and just eat some biscuits.

Reinertsen suggests creating a list of key decision areas to address this problem. The list can include things like “Working hours”, “Key technologies”, “Product design”, and “Team membership”. A manager should make it perfectly clear what the team’s authority level is for each key decision area in this list. When the horse can actually see the fence, there will be less fear and pain. And the farther away the fence, the more the horse will enjoy its territory.

It also works the other way around, because of the reflexive relationship of responsibility and accountability. A team usually delegates work to management, such as “Rewards and remuneration”, “Business partnerships”, “Market strategy”, and “Parking space”. The horse is not required to simply accept any kind of boundaries, constraints, and abuse.

Nature gave the horse strong teeth and hind legs for a reason.

This text is part of Delegation Boards, a Management 3.0 Workout article. Read more on my mailing list.

Don't Let Scrum Make You Fragile

My spouse has a personal trainer who makes him perform all kinds of healthy practices. One week it’s the lateral lift, another week it’s the biceps curl. Yesterday the focus was on the bench press, but tomorrow it could be the knuckle buckle. What’s important here is that it’s never the same thing. In order to become healthy a human body should not get too comfortable performing the same routine. The real value is in continuous adaptation to unanticipated stress.

Nassim Taleb called it antifragile, and described it like this:

Now the crux of complex systems, those with interacting parts, is that they convey information to these component parts through stressors, or thanks to these stressors: your body gets information about the environment not through your logical apparatus, your intelligence and ability to reason, compute, and calculate, but through stress. […] Thanks to variability, small variations make them [complex systems] adapt and change continuously by learning from the environment and being, sort of, continuously under pressure to be fit.

- Nassim Nicholas Taleb, Antifragile

Different words, same idea.

Antifragile

A complex system benefits from not following the same practices over and over again. By adding a little bit of stress, and continuous variability in the environment, the system learns to become fit and healthy.

Here’s another example.

I’ve always said that every child deserves a good dose of bacteria and viruses. This significantly boosts the child’s immune system. Instead, we raise generations of offspring with more sicknesses and allergies, because we’re protecting our children from healthy infections. Again, it’s the same thing. Short-term stress leads to long-term resilience. If you protect their bodies from a little bit of harm, you raise your kids to be quite a bit fragile. Do them a favor, and feed them some dirt. Because you love them.

It’s no different for organizations.

You should grow your teams to be antifragile.

No Frameworks, No Methods

I am in favor of unexpected changes, which is why I am against rigid and defined frameworks. Like Taiichi Ohno, the father of Lean thinking, I am against codification of methods. When you prescribe safe practices you introduce stagnation. It’s a short-term benefit, leading to a long-term danger. A short term protection from harm, culminating in long-term fragility.

Of course, people cannot learn values and principles without practices. We all have to start at the Shu level. But when you present a collection of good practices as a method or framework, you forget about the nature of complex systems. We learn from uncertainty, variability, and surprise. What strengthens your health is not that weekly relaxed lounge in the sauna. It’s the unexpected and dreadful plunge in an ice-cold bath afterwards.

Every regular practice works, until it doesn’t. Are the daily standups losing value? Try daily water cooler talks. Are people getting too comfortable sitting together? Move them around. Are the retrospectives not working? Buy them some drinks at Starbucks. Is a team too dependent on its task board? Hide it in the kitchen. Force people to do Scrum not by the book, and change things unexpectedly without notice. As I wrote before, ScrumButs are the best part of Scrum.

A complex system that gets too comfortable with certain behaviors runs the risk of becoming complacent, stagnant, and fragile.

Let people get used to surprise.

Workout Practices

For management practices it is no different. I recently asked participants in a webinar if they thought organizations need a management method or framework. Roughly 67% said “yes”.

I understand people’s need for more concrete management practices, but I am against the definition of a management method. The inevitable result would be a certification program that validates whether people understand and apply the method correctly. And learning would come to a standstill. This would be at odds with complexity science, and incompatible with systems thinking.

I prefer the workout metaphor.

Everyone understands 20 push-ups a day are healthy, but not required. It’s perfectly fine to replace this practice with something else. In fact, as your personal trainer knows, you should! Likewise, you could implement a work expo, until you are tired of it. You can play moving motivators, until people know too well how it works. You should try kudo cards, until they lose their value. And you can’t go wrong organizing exploration days, until you don’t need them anymore.

Do you want your organization to be fit and healthy?

Next week introduce a change that your well-performing team did not expect. Add a new stressor. Feed them some dirt, mixed with a bit of love.

 

The Merits System

It is clear that the annual bonus system doesn't work. A tremendous amount of research says that it demotivates people, destroys collaboration, and causes dysfunctional behavior among managers and employees.

What also doesn't work is the flat system, where everyone simply gets the same compensation or bonus. This also demotivates most people. And it makes organizations inflexible in times when agility is needed.

What we need is a merits system...

5 Criteria for Fair Compensation

In an agile organization, working in an uncertain environment, I believe workers should have a steady salary that is predictable and slightly conservative. On the other hand, they should also get extras depending on the unpredictable part of the environment. Both salaries and extras should be brutally fair and based on merits, not equality. This has led me to suggest the following practical constraints, for better compensation systems, based on the five problems listed in an earlier post:

1. Salaries should be expected, but bonuses should not.
   Always keep it a surprise. When bonuses become frequent and anticipated, they ought to be converted to regular salaries.
2. Earnings should be based on collaboration, not competition.
   When determining how much people should earn, the main criteria should be their contributions to a common goal, or shared purpose.
3. Peer feedback is the main performance measurement.
   Contributions to a shared purpose are best detected and evaluated by peers, not by managers. Only the whole system knows all details.
4. Use creative thinking to grow the compensation system.
   Expect that people can (and will) game any system, and tap into that creativity by inviting and supporting it, instead of driving it out.
5. Use compensation to nurture their intrinsic motivation.
   Make money a reflection, not a competitor, of people’s curiosity, honor, acceptance, mastery, and all other intrinsic motivators.

Of course, implementing these suggestions for a compensation system is not a trivial thing. But I discovered different ideas that seem to work pretty well for various creative organizations, and which turned out to be quite compatible with each other, and with the science of behavioral economics [Ariely, Predictably Irrational].

A Better System

The elevator-pitch-version goes like this…

1. You start by setting up a virtual currency, such as credits, points, or hugs. And every month every employee gets an equal share of the virtual currency.
2. Employees are then required to give all their credits to co-workers. They can use any criteria they want, as long as they don't keep any credits themselves.
3. Employees accumulate earned credits (received from co-workers). At random moments they can exchange credits for real money, using an exchange rate.

This is a payment system based on merits. It satisfies all criteria for fair compensation:

• Big bonuses cannot be anticipated.
• Peer feedback is the main performance measurement.
• Earnings are based on collaboration, not individual performance.
• Creative thinking is used to game and tweak the system.
• The earnings reflect purpose, mastery, status, etc…

Run a Safe-to-Fail Experiment

Money and emotions are tricky things and therefore any system that involves both will have to be set up in a way that is safe to fail. With small increments (such as weekly or monthly experiments instead of quarterly or annual outcomes) the feedback cycle is shorter and people will learn faster how to improve the system. The use of valueless virtual currency instead of real money will allow people to experiment more comfortably, and it will be easier for them to decide that a chosen path is not working, and change direction, or start from scratch. We must also realize that creative people will game the system. But this creativity can be exploited to grow a more resilient system. The short iterations and valueless currency should help people to adapt to each other’s strategies, and management can tweak the constraints, all in favor of collaboration and working towards a common purpose.

If you are interested, I have a 20-page article about Merit Money available for download.

This text is part of Merit Money, a Management 3.0 Workout article. Read more here.

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The Flat System

Some people argue that organizations should get rid of their bonus systems. They say most of an organization’s performance is in the system, not in the people, and therefore it’s best not to differentiate between employees. Everyone should get the same bonus. However, by the same reasoning it then also follows that everyone should be getting the same monthly salary. After all, how can you measure that the CEO works any harder than the receptionist?

I believe a flat compensation system doesn’t address the challenge of paying employees what they really earned. First of all, there is the problem that roughly 80% of all people think they perform better than average [Haidt, The Happiness Hypothesis p.67], and thus, when everyone gets the same as everyone else, 80% of the workers will feel underpaid. (It won’t be true, but you can’t argue with feelings without real data.)

Second, while bad fortune in business is usually absorbed with conservative salaries and incidental layoffs, good fortune should likewise be enjoyed with extra payouts and by hiring new people. When you don’t pay any extras to workers, the workers share the burden of setbacks, while only the business owners reap the benefits of success. This is probably not motivating to most people. (It has certainly never motivated me.)

Last but not least, organizations should try to benefit from unpredictable events in their business environments. They should be antifragile [Taleb, Antifragile l.1672], which means they must get used to dealing with fluctuating revenue streams. And employees should be managed to deal with flexible income. Those who insist that income must be constant automatically guarantee that their organizations will be fragile. (And they will earn a constant income of zero after failure.)

In other words, the flat system is a bad alternative to the bonus system. Can we do better?

This text is part of Merit Money, a Management 3.0 Workout article. Read more here.

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The Bonus System

A practice that has infiltrated the western business world like a pestilence in a shanty town is the annual bonus system. The idea of this practice is that managers give workers targets, and calculate annual bonuses which usually depend on people’s performance ratings, job position, salary, overtime, age, shoe size, and a host of other variables. The common rationale behind the bonus system is to incentivize performance. But actually, it stinks.

Decades of research has confirmed, again and again, that bonus systems rarely have a positive effect on people’s performance when they are involved in creative knowledge work [Pink, Drive] [Kohn, Punished By Rewards]. On the contrary, the effect is just as likely to be negative [Fleming, “The Bonus Myth”] [Spolsky, “Incentive Pay Considered Harmful”]. There is so much wrong with traditional incentive programs, it is impossible to list all their problems. But I feel incentivized to give you the most important ones here:

1. People get addicted to regular rewards, and if they don’t get their anticipated reward, they will feel disappointed or punished. This ultimately destroys motivation and thus performance. [Kohn] [Pink]
2. Individual rewards disrupt collaboration, which is crucial in creative knowledge work. It stimulates competition and cheating, which destroys relationships between workers, and also between workers and their managers. [Kohn] [Fleming] [Pink]
3. Traditional bonus systems rely on objective measures, but reality is far too complex to capture in numbers. The metrics ignore the soft side of great performance, including teamwork and collaboration. [Kohn] [Spolsky].
4. Research shows that rewards distract people from complex work, disrupt creative thinking, and increase people’s stress levels. This causes them to play safe and prefer easy tasks, while innovation requires the opposite: taking risks and doing complex tasks. [Kohn] [Fleming] [Pink].
5. The research also shows that bonuses undermine intrinsic motivation and altruism. As soon as rewards are handed out people start to think, “They pay me extra for this work thus it cannot be fun, interesting, or good.” [Kohn] [Fleming] [Pink]

It should also be noted that bonus systems are usually based on company profits. But most workers cannot directly relate their work to their company’s profits, because most of what influences profits is beyond their own control [Bomann, “Bonus Schemes Should Be Handled with Care”].

This text is part of Merit Money, a Management 3.0 Workout article. Read more here.

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The Problem of Vogon Mission Statements

A few months ago I was in a bar in Melbourne. I had been there for a number of hours, enjoying a relaxed atmosphere, friendly service, nice music, good coffee, and great Wi-Fi. (As a global bumblebee, I can say this is an almost unique combination.) I value good suppliers as much as I value good customers, and so I promoted the bar on Twitter, after looking up their details on-line. This is the “company mantra” that I found on their website:

When I was a little kid, some of my fondest memories were of the family holidays down at the beach. A fantastic ensemble of blurred memories filled with colour, excitement, adventure, food and that old weatherboard holiday house. Nowadays, we’re all so busy and don’t have time to visit the beach. Queen Street Rescue is exactly that! It’s your rescue! It’s a place where you can sit and relax and experience a little bit of the beach deep inside the City.

- Queen Street Rescue, “Our Mantra”

And it worked. I had planned to have just a late breakfast, but I left after eight hours, three caffè lattes, lunch, tea, dinner, and a diet coke. The only thing I missed was half-naked youths on surf boards. (It was supposed to be like a beach, after all.)

The creation of mission statements seems to be one of the favorite activities of corporate management teams. Unfortunately, like poetry, many people try it, but only few are any good at it. And then you end up with mission statements such as “Profitable growth through superior customer service, innovation, quality and commitment” or “To be the leader in every market we serve, to the benefit of our customers and shareholders”, yadda yadda yadda (McKeown, “If I Read One More Platitude-Filled Mission Statement, I’ll Scream”).

I call them Vogon mission statements, the third worst in the universe. The second worst mission statement in the universe was written by a council of 63 lawyers on the planet Gnark, which, after the famous court case of Short-throat Sam versus the Cucumber, resulted in virtually all vegetables, and two very unfortunate species of fruit, being sued into extinction, while the last remaining settlement of carrots, celery, and radishes lived in exile on Gnark’s second moon, briefly thriving and producing green stalks with oddly protruding orange balls, until the untimely crash landing of Björn the Blender. The very worst mission statement in the universe was created by a company on earth called Yahoo!

This text is part of Work Expo, a Management 3.0 Workout article. Read more here.

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The Problem of Top-Down Goals

There’s a problem I have with suggestions for goals and purpose in standard management literature. Most writers and consultants assume that it’s a top-down exercise, where the management team defines the direction, and the rest of the business has to be “aligned”. Only some seem to understand that reality is in fact a little more complex.

There is a dominant discourse in which it is assumed, without much questioning, that small groups of powerful executives are able to choose the ‘direction’ their organization will move in, realize a ‘vision’ for it, create the conditions in which its members will be innovative and entrepreneurial, and select the ‘structures’ and ‘conditions’ which will enable them to be in control and so ensure success.

- Ralph Stacey, Complexity and Organizational Reality 

My purpose as a writer does not simply disappear when I’m part of a community of trainers who are building a business focused on management courses. I still need to write, while I’m organizing courses with others. Likewise, the purpose of an organization does not simply overrule the purpose of a team, or the purpose of an individual. The complex interweaving of collaboration and competition that we see happening horizontally between stakeholders is also happening vertically between different levels of abstraction. The purpose of an individual both aligns and conflicts with the purpose of the team, while the purpose of the team aligns and conflicts with the next higher levels of the organization. The alignment enables us to exchange value, while the conflict helps us to be creative and innovative. Complex systems survive because both happen at the same time. Alignment and conflict go hand in hand, both up and down.

Therefore, I strongly suggest that organizational layers are aware of each other’s purposes. Employees should subscribe to the purpose of the organization, while the organization must recognize the needs of employees. Teams will be in alignment and conflict with the goal of the department, while the department has to allow (and even invite) the emergence of purposes of teams.

This text is part of Work Expo, a Management 3.0 Workout article. Read more here.

 

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The Problem of Stakeholder Focus

As soon as an organization, a team, or a person, defines their purpose as a focus on one thing above other things, there will be sub-optimization. When I focus on writing, I cannot focus on knitting. Somebody else will have to do the knitting, so I can focus on the writing. And maybe later we can trade my wonderful book for your beautiful sweater. We have to realize that everyone is entangled in a web of economic dependencies, and therefore the purpose you choose for yourself should somehow generate value for the others around you. Or else nobody will give you a knitted sweater.

This all makes perfect sense for complexity scientists, who have known for a while that complex adaptive systems find a global optimum through local optimizations and interdependencies. The parts in a complex system all try to optimize for themselves, but their efforts depend on the constraints imposed on them by the parts around them. With a mix of competition and collaboration the parts interact with each other without any focus on a global purpose. Nevertheless, the end result is often an optimized system. Biologists call it an ecosystem. Economists call it an economy. I call it uncommon sense.

Most management scholars and experts have ignored the insights from the complexity sciences (or were unaware of it) suggesting goals that are too narrow. There are many corporate mission statements in the world expressing ideas such as “Make money for shareholders”, “Put customers first” and “Achieve superior financial results”. In each of these cases the purpose of the organization is (too) narrowly defined as providing value to one stakeholder. Management consultant Patrick Lencioni analyzed the various kinds of mission statements that organizations define for themselves, and he describes that goals have been created with a focus on clients (“Delight the customer”), community (“Serve the city”), employees (“Put workers first”), and business owners (“Create shareholder value”). Besides the limited focus on just one kind of stakeholder, the biggest problem I have with such mission statements is that they usually explain who, but not why.

Among the different kinds of mission statements Lencioni also found examples with a primary focus on industry (“The work we do”) or greater cause (“What we want to achieve”). I think these are better choices, because they allow for local optimization (which is fine) while not turning the focus on just one external relationship (which is not). For example, I could define my purpose as “becoming a great writer” (the work I like to do) or “helping people worldwide to enjoy their jobs” (the greater purpose I’m striving for). I have complicated value exchanges with many stakeholders, including readers, writers, speakers, consultants, trainers, organizers, freelancers, and some even more complicated ones with my spouse, friends, and family. Complexity theory allows only two stakeholders to see themselves as more important than all the others: me and everyone. Dawkins, Hayek, Kauffman, and many other scientists and philosophers would agree that it amounts to the same thing. By focusing on me, while adhering to constraints imposed by others, I help optimizing the whole for everyone.

This text is part of Work Expo, a Management 3.0 Workout article. Read more here.

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Business Guilds

Have you ever seen the façades on the Grand-Place in Brussels? They look absolutely amazing. In the past they were literally the image of the guilds of Brussels. These days the guildhalls offer expensive chocolates to naïve tourists who are not aware that the really good chocolatiers reside on the Grand Sablon, not far away.

Guilds

In the Middle Ages craftsmen often organized themselves in guilds. Formed around disciplines like carpeting, carving, and masonry, these guilds were sometimes strictly organized, putting up rules for workers around the country. Others were structured in a more relaxed way, and reaching no further than the city walls. But no matter how they worked, the guilds enabled people to learn a craft in master-apprentice working relationships, and they defined proper procedures and behaviors for all who practiced a craft.

Communities of Practice

Of course, the way we work nowadays isn’t suited for the way these guilds worked. (Although public services in Brussels could very well use some schooling when it comes to public service.) At the same time there are some aspects of our business that involve craftsmanship. That’s why the craftsmen within a company sometimes organize themselves in a modern version of a guild, which we call a community of practice (CoP). This is basically a group of professionals that share a common interest or area of work. The purpose of a CoP is to learn and share ideas, but also to standardize ways of working, or even to apply some forms of governance. Since they often cut across teams, products, and business units, they have a tendency to strengthen the social network in an organization…

Read the full article on Business Guilds here.

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